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As an HVAC business owner, you should have been learning about cooling and heating systems for several years. That is why your bookkeeping and accounting knowledge is probably lacking. Your books are being pushed aside and are not updated frequently. Unfortunately, you need to know that you cannot continue this situation for a long time, as your HVAC field service business is going to stop thriving soon.
You have to organize the vital financial data required for your HVAC company because it helps your business have a healthier financial status to go forward. In this article, we are going to review some useful tips regarding bookkeeping and accounting for HVAC businesses to avoid any possible mistakes and losses.
The exact importance of bookkeeping is not understood until the tax season rolls around. If you neglect your HVAC business’s bookkeeping and accounting, you are going to get anxious at the end of the year when you find yourself stuck between the myriad bookkeeping tasks left behind.
The best approach is to keep your HVAC company’s books updated frequently throughout the year, so you can always have a clear vision of your business’s cash flow and financial performance. Also, keep in mind that you should meticulously track all of your invoices and receipts in your field service HVAC software if you have any. If you can see that you have any billable expenses for your customers, make sure they are recorded on their invoices.
Generally, keeping your HVAC field service bookkeeping and accounting up to date allows you to have peace of mind once the tax season arrives, as you will not have to be stressed about your bookkeeping tasks. This way, you can understand how much sales tax you need to pay once the deadline is due. As a result, you will not have to pay penalties for inaccurate calculations.
You need to know the basic knowledge of bookkeeping and accounting to understand the financial statements of your field service business. You need to be able to read your income statements, balance sheets, and cash flow statements to make critical decisions.
One of the main statements you can use massively for optimized analysis is the Profit and Loss (P&L) statement. It can simply tell you whether your HVAC field service business is profitable.
You can also compare the P&L of the current month with previous months to identify how your HVAC company is working.
Balance sheets are also a perfect solution to have a clear vision of your HVAC field service financial management. It is possible to see all of your assets, equity, investments, and debts. Also, you can record your HVAC company’s cash in your balance sheets so you can always be sure that you have a sufficient amount of working capital to meet your short-term liabilities.
Your cash flow statement is also integrally important. While your income statement may show that you are making a profit, your cash flow statement can tell you whether your business is cash flow negative or positive. You should analyze your cash flow statement together with your P&L and balance sheets to find out the exact financial situation of your business.
In general, if you frequently monitor your financial statements, you will be able to have an overview of your overall business performance and detect the potential issue that you may come up with in the future.
In your HVAC field service company, you need to have a cash flow projection to find out if you have sufficient cash flow moving forward. This way, you can understand the amount of money that comes into and goes out of your HVAC business, as well as the amount of cash that is left at the end of each period.
You can add various items to your cash flow projection, including estimated accounts receivable, overhead expenses, future inventory costs, and payrolls. It is essential to keep your projection updated and compare it with actual business data.
Predicting the exact cash flow of your HVAC field service company can help you make the best decisions, plan wisely in advance, and avoid unnecessary cash flow crises. After all, knowing how your business performs in the next month helps you make better decisions about saving, spending, and investing in your field service company today.
Any HVAC company usually requires large vehicles such as vans to hold and carry the expensive equipment they use in their job. Therefore, it is essential to track these large purchase costs and depreciation for future audits and tax liability purposes.
You need to be sure that you do not expense your equipment and vehicles upon purchasing them as it will grossly exaggerate your expenses for that specific timeframe. Also, it may understate your depreciation expense for the rest of that equipment’s life cycle.
Most HVAC field service companies need to use various bookkeeping and accounting software to handle their scheduling, invoicing, payment, etc. Your field service management software should be able to sync data efficiently with your bookkeeping and accounting software.
This will help the HVAC businesses save a great amount of time and avoid submitting various information repeatedly, including customer data, products, invoices, services, payments, and timesheets. Also, this eliminates the possibility of data entry loss.
As your HVAC business grows, you certainly need to adapt your business to the newest technologies on the market. That is why a bookkeeping done-for-you service like the one that Less Accounting offers can help you greatly access your data from everywhere including a computer, mobile, tablet, etc. This service helps you avoid tax mistakes and focus on your HVAC business only. It is also good to know that Less Accounting offers self-service accounting software too. You can use both services at the same time for maximum profitability of your business.